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Blueprint for Energy Security in the National Electricity Market

Publication date: Friday, 07th October 2016.

Independent Review Terms of Reference

The Australian electricity market is undergoing a significant transition, including due to rapid technological change, the increasing penetration of renewable energy, a more decentralised generation system, withdrawal of traditional baseload generation and changing consumer demand.

Energy security is the paramount responsibility of governments. Recent events have once again highlighted the importance of ensuring the security and reliability of the National Electricity Market (NEM).

The COAG Energy Council has initiated a number of processes and work programs to properly understand the causes of these specific events as well as to examine and advise on the broader issues facing the system due to the increasing penetration of intermittent generation. These include:

Reviews into the South Australian ‘system black’ event by AEMO, AER and the AEMC

Detailed analysis and reports by AEMO and the AEMC into future power system security and market frameworks

Analysis by AEMO and the AEMC into the impact of carbon mitigation policies at both the Federal and State level on energy markets

A review of governance arrangements (Vertigan review)

National Gas market reforms which relate to NEM security, reliability and affordability; and

A review of the appropriateness of existing regulatory arrangements for interconnector investment

In light of this body of work, the Australian Government’s commitment at Paris and the integration of climate and energy policy at the federal level, it is timely for a wider process to take stock of the current state of the security, reliability and governance of the NEM and provide advice to governments on a coordinated, national reform blueprint.

Review purpose and scope

The purpose of the review is to develop a national reform blueprint to maintain energy security and reliability in the NEM, for consideration by the Council of Australian Governments through its Energy Council.

The review will draw together and build on the analysis and findings of the recent and ongoing work streams, as identified above. It will also consider any other matters and processes that may be relevant to system security and reliability.

The blueprint will outline national policy, legislative and rule changes required to maintain the security, reliability and affordability of the NEM in light of the transition taking place.

Consistent with the National Electricity Objective, the review will examine the costs and benefits, including to consumers and industry, of the options to address any current or future vulnerabilities identified in the NEM.

The report will be by chaired by Dr Alan Finkel AO, Commonwealth Chief Scientist, and supported by two deputies to be determined by Council.

It is envisaged a preliminary report will be prepared for the COAG Leaders’ Meeting in December with a final report early in the new year.

Further information

Independent review into the reliability and security of the National Electricity Market​

At an extraordinary meeting on 7 October 2016, COAG Energy Ministers agreed to an independent review of the national electricity market to take stock of its current security and reliability and to provide advice to governments on a coordinated, national reform blueprint. The review will be led by the Chief Scientist, Dr Alan Finkel AO, assisted by an expert panel: Ms Karen Moses, Ms Chloe Munro, Mr Terry Effeney and Professor Mary O’Kane AC.